How Did Toys R Us Go Out of Business?

Here’s a look at the factors that led to the demise of Toys R Us and how the company’s failure will impact the toy industry.

Checkout this video:

Introduction

It’s the end of an era. Toys “R” Us, the big box toy store that has been a staple in shopping malls across America for generations, is going out of business. Here’s a look at how the once-mighty retailer fell.

The company filed for Chapter 11 bankruptcy in September 2017, citing $5 billion in debt and competition from online retailers such as Amazon.com as some of the reasons for its financial troubles. In an effort to restructure its debt and stay afloat, the company closed 182 stores across the United States in 2018.

In March 2018, Toys “R” Us announced it would be closing all of its stores in the United Kingdom, and by June, it was liquidating its U.S. operations. That’s when things really started to go downhill for the company.

With no buyers for its assets and mounting debt, Toys “R” Us was forced to liquidate all of its U.S. operations in June 2018. Some 31,000 employees lost their jobs as a result. The company’s Canadian subsidiary also filed for bankruptcy protection and is currently in the process of shutting down its stores.

The History of Toys “R” Us

Toys “R” Us was an American toy and juvenile-products retailer founded in 1948 and headquartered in Wayne, New Jersey. The company filed for Chapter 11 bankruptcy protection in September 2017 and its assets were sold to various buyers in 2018. The company’s international operations were sold to a consortium of buyers, which included Krishnan Ganesh and his wife Meena, and several other investors. The U.S. operations were acquired by a group of investors led by Kohlberg Kravis Roberts and Vornado Realty Trust.

The Decline of Toys “R” Us

In 2018, Toys “R” Us filed for bankruptcy protection in the United States, and soon liquidated all of their stores. This was a shocking downfall for a company that had been an iconic part of the American retail landscape for generations. So, what led to the decline and eventual demise of Toys “R” Us?

There are a number of factors that contributed to the decline of Toys “R” Us. First, the company was saddled with a large amount of debt after being taken private in a leveraged buyout in 2005. This left them with little financial flexibility to invest in their stores or responding to changes in the retail landscape.

In addition, Toys “R” Us was slow to embrace e-commerce and failed to keep up with competitors like Amazon and Walmart who were quickly dominating online toy sales. They also lost market share to specialty toy retailers like Lego and board game cafes. Finally, the rise of digital toys and experiences like video gaming consoles hurt demand for traditional toys.

All of these factors led to declining sales and profitability at Toys “R” Us, which ultimately resulted in their bankruptcy filing and store closures.

The Causes of Toys “R” Us’ Bankruptcy

One of the most iconic toy stores, Toys “R” Us, unexpectedly filed for bankruptcy in September 2017. This was a move that caught many people by surprise, as the company had $11 billion in revenue the previous year. So, how did this happen? How did Toys “R” Us go from being a successful company to filing for bankruptcy?

There are two main reasons that are typically cited for the company’s downfall. The first is that Toys “R” Us was slow to adapt to the changing retail landscape. When Amazon became a major force in retail, Toys “R” Us failed to take them seriously as a threat. They also failed to invest in their online presence and make it easy for customers to buy toys online.

The second reason that is often cited is that Toys “R” Us was saddled with too much debt. In 2005, the company was taken private by two investment firms, Kohlberg Kravis Roberts and Bain Capital. In order to finance this deal, they took on a lot of debt, which left them with interest payments of $400 million every year. This made it difficult for them to invest in their stores and stay competitive against other retailers.

These two reasons – failing to adapt to the changing retail landscape and being saddled with too much debt – ultimately led to the demise of Toys “R” Us.

The Impact of Toys “R” Us’ Bankruptcy

On September 18, 2017, Toys “R” Us, Inc. announced that it would be filing for Chapter 11 bankruptcy protection in the United States. This followed similar filings by the company’s Canadian and British subsidiaries. The company stated that it would continue to operate its stores worldwide during the bankruptcy process.

The company’s bankruptcy filing was the culmination of a long decline for Toys “R” Us. The rise of e-commerce and competition from big-box retailers like Walmart and Target had slowly eroded the company’s market share in recent years. In addition, Toys “R” Us had been saddled with debt since its leveraged buyout by private equity firms in 2005.

The bankruptcy filing was a blow to the toy industry, as Toys “R” Us was one of the largest buyers of toys from manufacturers. It also put pressure on suppliers such as Hasbro and Mattel, who saw their stock prices drop on news of the bankruptcy.

The impact of Toys “R” Us’ bankruptcy is still being felt today. The company’s liquidation in 2018 led to the closure of all its stores in the United States, resulting in the loss of 33,000 jobs. The closure of such a large retailer also created a void in the market for toy manufacturers and suppliers.

The Future of Toys “R” Us

In September 2018, Toys “R” Us announced that it would be shutting down all of its stores in the United States. This announcement came after the company filed for Chapter 11 bankruptcy protection in 2017. So, what led to the downfall of this once-beloved toy retailer?

There are a number of factors that contributed to the demise of Toys “R” Us. First, the company was saddled with a large amount of debt. In 2005, a group of private equity firms bought Toys “R” Us for $6.6 billion. To finance this purchase, the new owners took on a lot of debt, which put Toys “R” Us at a disadvantage from the start.

Another factor that played a role in the company’s demise is the rise of e-commerce giants like Amazon.com. These companies offer consumers more convenience and often better prices than traditional brick-and-mortar retailers like Toys “R” Us. In addition, many consumers now do their research online before making a purchase, which further reduces the need for physical stores.

The final nail in the coffin for Toys “R” Us may have been its failure to adapt to changing consumer habits. For example, parents are now more likely to buy their children’s toys online or at discount retailers like Walmart or Target. In addition, many parents are choosing to wait longer to buy their children’s toys so that they can take advantage of sales or discounts.

While there are many factors that contributed to the demise of Toys “R” Us, ultimately it was a combination of factors that led to the death of this once-beloved toy retailer.

The Legacy of Toys “R” Us

For generations, Toys “R” Us has been a go-to destination for kids and parents alike, offering a seemingly endless supply of toys and games for children of all ages. But in 2018, the company announced that it would be going out of business, bringing an end to an iconic American retailer. So how did Toys “R” Us go out of business?

There are a number of factors that led to the demise of Toys “R” Us. First, the company had a significant amount of debt, which made it difficult to invest in new stores and inventory. Additionally, the rise of e-commerce sites like Amazon put pressure on brick-and-mortar retailers like Toys “R” Us. Finally, competition from toy store chains like Walmart and Target also took a toll on the company.

In the end, these factors combined to create a perfect storm that resulted in the closure of Toys “R” Us stores across the country. While it’s sad to see such an iconic retailer go out of business, there are still plenty of other places for parents to find toys for their kids.

Conclusion

In conclusion, despite being one of the most iconic toy stores in America for decades, Toys R Us was unable to keep up with changing consumer trends and tastes, and ultimately went out of business. While the company had loyal customers and a niche market, it was unable to compete with toy giants like Walmart and Amazon, who offered lower prices and a wider range of products. In the end, the death of Toys R Us is a cautionary tale about the importance of staying relevant in today’s ever-changing marketplace.

FAQ

-What led to Toys “R” Us going out of business?
There are a number of factors that led to the company’s demise. Firstly, the rise of online retailers such as Amazon put pressure on toy store chains. Secondly, Toys “R” Us was saddled with a $5 billion debt from a leveraged buyout in 2005. This made it difficult for the company to invest in its brick-and-mortar stores or compete on price. Finally, the company made the strategic mistake of investing heavily in baby products just as the U.S. birthrate began to decline.

-When did Toys “R” Us go bankrupt?
Toys “R” Us filed for bankruptcy in September 2017.

-What will happen to Toys “R” Us stores?
The last Toys “R” Us stores in the United States closed their doors on June 29, 2018.

References

References

-Donnell, Alex. “Here’s How Toys ‘R’ Us Went Out of Business.” NPR, NPR, 15 Mar. 2018, www.npr.org/sections/thetwo-way/2018/03/15/593794376/heres-how-toys-r-us-went-out-of-business.

-“Toys”R”Us Bankruptcy: 10 Things You Need to Know.” Fox Business, Fox Business, 15 Sept. 2017, www.foxbusiness.com/features/toysrus-bankruptcy-10-things-you-need-to-know.

Kahn, Lisa Rowan, and Abigail Caplovitz Fielding. “What Caused Toys “R” Us To Declare Bankruptcy.” Forbes, Forbes Magazine, 10 Sept. 2017, www.forbes.com/sites/abigailfieldingsmith/2017/09/19/toysrus/#3a0f4c4861f5

Scroll to Top